We examine the catches in 'buy lists' such as the Hargreaves Lansdown Wealth
150, which are used by millions of savers

Fund "tip" lists put together by firms such as Hargreaves Lansdown and Fidelity are used by millions of people to pick their investments. Their value in boiling down thousands of funds into 100 or so decent options is enormous – particularly for inexperienced or busy investors who would otherwise struggle to know where to start.

But how far can you trust them? And are some lists more reliable than others? These questions were thrust into the spotlight last week when the City regulator, the Financial Conduct Authority, voiced fears that some fund-selling websites were “potentially misleading”.

Most fund shops have their own version of these “buy lists”, although they are normally labelled “favourite funds” because brokers are not permitted to give financial advice. However, the regulator is concerned that investors might be led to unsuitable funds if brokers fail to explain their selections.

Below we analyse the six main tip lists, highlighting their strengths and weaknesses.

But first a failing that is common to most fund shops: investors could easily conclude that any fund named on one of the lists is being recommended as a buy. In fact, the lists normally attempt only to identify the best funds in each sector, saying nothing about the suitability of that sector for investors at the time.

Hargreaves Lansdown

The “Wealth 150” will perhaps be the most familiar fund list to investors. Launched in 2003, it lists Hargreaves’ favourite funds across the majority of the main investment sectors – bonds and shares from different regions such as Britain, Europe and the emerging markets.

The firm focuses on the person who runs the fund rather than the fund itself and meets him or her regularly to get a feel for their skill. There are currently just 90 funds in the Wealth 150. An even smaller “buy list”, the Wealth 150 Plus, has been created. It comprises 28 funds for which Hargreaves has secured lower charges.

Pros: The research on each fund is detailed and thorough, explaining why it has made the grade as one of Hargreaves’ favourite funds. A digestible number of funds is listed – more often feels excessive. Many fund managers tipped have consistently produced table-topping performance over their peers.

Cons: No investment trusts or tracker funds make the list. This seems an extraordinary oversight given that there are many excellent funds of this type. Another blemish is the fact that Hargreaves rarely adds new and up-and-coming funds to the list, preferring those with established records. This means investors must work harder to identify future star managers.

Fidelity Personal Investing

Fidelity names a handful of favourite funds across nearly every sector and country in its “Select List”. A total of 137 funds are on the list, including 12 tracker funds. A short explanation of why each fund is chosen is provided, with a more in-depth explanation of how the list is constructed.

Pros: The list is comprehensive but not too overwhelming, as just a handful of funds are named for each sector. It is reviewed every three months, when funds can be relegated or promoted to the list. Richard Bradley of Platforum, an independent consultancy, said: “The list provides investors with manageable chunks of two to eight funds to choose from. It also dovetails with Fidelity’s other guidance options on the website.”

Cons: Investment trusts and exchange-traded funds, a type of tracker fund, are poorly represented. There also seems to be some favouritism – 17 Fidelity funds are on the list. The second most popular fund group is M&G with nine, while Aberdeen has seven.

Charles Stanley Direct

The “Foundation Fundlist” is shorter than rivals’ versions, with 57 funds and 17 investment trusts. Many of the main sectors are covered. There is also a top 10 most-bought tool, so investors can see which funds are proving popular with other customers.

Pros: Of all the lists, this is the easiest to navigate. Regular fund updates are provided, catering for both experienced and first‑time investors.

Cons: The list is small and therefore some investment sectors are under-represented. For example, there are only seven bond funds and no property funds. Justin Modray, a fund expert at Candid Financial Advice, said Charles Stanley had a smaller research team than its rivals so was sticking to its knowledge base.

Chelsea Financial Services

The broker has two tip lists – one with 97 funds and another more concise version of 37. As with other lists, the fund manager’s skill is the key criterion. There are helpful tools available to investors, including a “yield filter”, which ranks funds according to the income they pay.

Pros: Fund information is presented in a clean and user-friendly manner, with little jargon. This will particularly help inexperienced investors.

Cons: No investment trusts or exchange-traded funds make the list. This seems an oversight, because even newer investors can consider these options.

Bestinvest

A team of researchers is behind the Premier Select List, which is aimed at investors with a long-term horizon. To win a place, a fund manager must have a proven track record of beating peers. Other factors, such as whether a fund manager has put his or her own money into the fund, are also considered. There are 127 funds and 76 investment trusts in the list. Tracker funds are also included.

Pros: The only “buy list” to cover every different type of investment fund. Unusually, Bestinvest also provides its views on how it expects various investment sectors to perform, which is a helpful aid for those who do not know where to invest.

Cons: Bestinvest has a star rating system – similar to those used for film reviews. But there is no analysis to explain why a five-star fund is better than a three, just a short explanation of how the ratings work.

The Share Centre

On The Share Centre’s website you can find its “Platinum 120” list. As with Hargreaves, the name is slightly misleading: it actually includes 115 funds across various sectors. Tools show how a fund has performed and its charges. A risk rating is also provided – funds are ranked one to 10 – to help investors work out which funds are suitable for their circumstances.

Pros: The “advice team” view for each fund is detailed, providing more insight than many other buy lists. The list is updated regularly.

Cons: The novice investor might struggle with the terminology. There is a proliferation of investment jargon such as “high alpha”, which just means above-average performance. The list also plays safe, with a bias towards large fund groups. Some are apparently favoured above others; for example, there are 12 M&G funds and nine from Jupiter.